nep-spo New Economics Papers
on Sports and Economics
Issue of 2023‒06‒19
two papers chosen by
Humberto Barreto
DePauw University

  1. Disagreement and Market Structure in Betting Markets: Theory and Evidence from European Soccer By Hegarty, Tadgh; Whelan, Karl
  2. Do Gamblers Understand Complex Bets? Evidence From Asian Handicap Betting on Soccer By Hegarty, Tadgh; Whelan, Karl

  1. By: Hegarty, Tadgh; Whelan, Karl
    Abstract: Online sports betting is growing rapidly around the world. We describe how the competitive structure of the bookmaking market affects odds when bettors disagree about the probabilities of the outcomes of sporting events but are on average correct. We show that the demand for bets on longshots is less sensitive to the odds than bets on favorites. This means monopolistic bookmakers will set odds exhibiting favorite-longshot bias while competitive bookmaking markets will not have this feature. We develop a version of the model for soccer matches and use these results to explain empirical findings on odds for over 80, 000 European soccer games from two different bookmaking markets.
    Keywords: Favorite-Longshot Bias, Monopoly, Sports Betting
    JEL: D42 G14 L83
    Date: 2023–05–08
  2. By: Hegarty, Tadgh; Whelan, Karl
    Abstract: The Asian Handicap is a way to bet on soccer matches where payouts depend on an adjustment to the score that favors the weaker team. These bets are more complex than traditional betting on soccer because they require assessing the likely goal difference in the match rather than just the probabilities of a home win, away win or draw and because they can feature the possibility of all or half the bet being refunded. We show that bettors systematically lose more money on the type of Asian Handicap bets where refunds are not possible than they do when it is possible to obtain a half refund and that bets with the possibility of a full refund have the lowest loss rates. Bookmakers do not appear to adjust odds to equate the expected return on these bets. We show that the pattern of differences in loss rates across bets is predictable based on the odds quoted.
    Keywords: Pricing Complexity, Betting Markets, Asian Handicap
    JEL: G0 G02 L83
    Date: 2023–05–08

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